The Razor’s Edge

2-Year Price History

Ockham’s Rating

Rating Specific Information Withheld Premium Access Only

APC Revenue

As a value investing shop, we are interested in seeing how APC’s revenues measure up against past performances. One easily understandable way of doing that is to compare Price to Sales per share levels over a given time frame. Assuming it is available, Ockham prefers to look at ten years of history (for this stock there are 10 years of history available) and we weigh recent years more heavily. This allows us to find weighted average historical high and low Price to Sales ratios, which give us a better idea of the stock’s current underlying value. Using this method, we have established a high range for Price to Sales of 2.72x and the low end of the range at 1.54x.

With respect to these historically rational metrics, notice that the current Price to Sales per share ratio for APC of 1.34x is well below its normal historic Price to Sales levels. At a price of $41.05, APC is 38% below where we would expect to see it. Clearly, this stock looks undervalued compared to historical levels, at least on a Price to Sales basis. This will positively affect our analysis because it is rare to find a stock this far below historical norms, and we would expect some price appreciation to bring this metric back towards a more normal range.

APC Cash Earnings

Cash Earnings is always one of the most important factors to review for a company and, more importantly, an investment in a stock. APC is below its historical average multiple of Cash Earnings. Looking at the last 10 years we can get a good understanding of what investors have grown to expect from APC. For example, APC’s Cash Earnings ratio per share has fluctuated between 3.60 and 6.76 over this historical timeframe. This range is based upon a proprietary weighted methodology at Ockham, but can clearly show an investor where APC is with respect to prior business periods.

So what does a Cash Earnings ratio below the historical norm mean for APC? Generally, APC’s investors have paid slightly higher stock prices for this level of Cash Earnings, which bodes well as a return to historical norms is statistically likely. However, it is never a guarantee that history gives us proper direction, particularly in fluctuating market cycles. So by utilizing a long term view and incorporating other areas of analysis (like Sales, Dividends, and management analysis), each investor can gain a more complete view of APC. Remember, that the average Cash Earnings level for APC has been 5.18, so the current Cash Earnings level of 4.85 is a positive in our view, but by no means is it overwhelming.

APC Dividends

When determining a company’s future prospects for success, Ockham Research sees analysis of dividend payments as a key additional factor. Even though it isn’t imperative for APC to shell out a dividend in order to receive a positive rating, it can be helpful to further our analysis.

The estimated annual dividend for APC is $0.36 producing a current dividend yield of 0.88%. Much like our evaluation of Sales and Cash Earnings per share, we review dividend yields from APC against the historic high and low levels over all available dividend history. Because dividends are a decision made exclusively by management, we view a healthy and rising dividend as a sign of confidence and strength. The highest dividend yield from APC over previous years was 1.47% while the lowest dividend yield was 0.26%. Management at APC has encouraged us with a current dividend yield of 1.73% above the historical median.